The Indian economy is likely to have grown between 6.7 per cent and 7 per cent during the April–June quarter of the current fiscal year 2025-26 (FY26), according to various agencies. The government will officially release the data at the end of this month.
The growth rate, based on GDP (Gross Domestic Product) expansion, was 6.5 per cent.
During the quarter under review, key high-frequency economic indicators showed good performance. For example, Purchasing Managers’ Index (PMI) for manufacturing during the April-June quarter was between 58,1 and 58.6. Similarly, the Services PMI started on a strong note in April at 58.7, then moved slightly to 58.8 in May before surging to 60.4 in June. Inflationary pressures continued to recede in Q1 of FY26, with CPI inflation falling to a 77-month low of 2.1 per cent in June 2025.
Trade performance
Amid shifting global trade patterns, India’s trade performance remains resilient in the first quarter of FY26. Total exports (goods and services) grew by 5.9 per cent (y-o-y), while core merchandise exports rose by 7.2 per cent (y-o-y). Foreign exchange reserves remained at a comfortable level, providing an import cover of more than 11 months. “Overall, the first quarter of FY26 presents a picture of resilient domestic supply and demand fundamentals,” a Finance Ministry report said.
Based on various indicators, a research report by SBI said, “Initial estimates showcase Q1 FY26 GDP could be at 6.8-7 per cent.” However, the gap between real and nominal GDP, which was as large as 12 percentage points in Q1 FY23, dropped sharply to 3.4 percentage points in Q4 FY25. Going forward, as inflation is historically low, the deflator will decrease, and the gap between real and nominal values will narrow. “This may mask the current deceleration in growth momentum going forward. Nominal GDP could drop to 8 per cent in Q1,” it said.
Services outperform industry & agriculture
Economic research firm ICRA has projected the year-on-year (YoY) GDP expansion to ease to 6.7 per cent in Q1 FY2026 from 7.4 per cent in Q4 FY2025, while outpacing the Monetary Policy Committee’s (MPC’s) recent forecast of 6.5 per cent. Further, the rating agency projects the growth in gross value added (GVA) to dip to 6.4 per cent in Q1 FY2026 from 6.8 per cent in Q4 FY2025. “Lower expansion in the industrial sector (to 4 per cent in Q1 FY2026 from 6.5 per cent in Q4 FY2025), and agriculture (to 4.5 per cent from 5.4 per cent), is likely to outweigh a pick-up in the performance of the services sector (to an eight-quarter high 8.3 per cent from 7.3 per cent),” it said.
Capex and infrastructure support growth
A research report by HDFC Bank expects growth to be 6.9 per cent. “Despite tariff headwinds in Q1, growth is expected to draw support from improved rural activity (demand and agricultural production), healthy government expenditure and with export of goods and services broadly holding up due to stocking up by US buyers,” it said. From the supply side, it estimates GVA (Gross Value added) growth at 6.7 per cent y-o-y. The gap between GDP and GVA is likely to driven by improved net indirect taxes as subsidy payout growth was lower compared to same time last year (GDP = GVA + Taxes – Subsidies), it added.
